Do I file Form 1040 even if no tax is owed?
Annual return obligations of this kind are generally required on the facts rather than on the tax result, so a nil position does not remove one. Every US citizen and lawful permanent resident with gross income above the filing threshold for their status, wherever in the world they live and whatever other country already taxed that income.
What happens if I have missed Form 1040 for several years?
Missed years are dealt with as a package rather than one at a time, because the route chosen for the first year affects the relief available for the rest. We map the years and the obligations before anything is filed.
Is Form 1040 the same as the other reports I already file?
No. The ordinary US individual return, filed by a citizen or green-card holder whose income, home and bank accounts are all outside the United States. Satisfying a different obligation, even one covering the same accounts or entity, does nothing for this one.
What exchange rate do I use on Form 1040?
The return is computed in US dollars, so every figure has to be translated first: the pay, the foreign tax paid on it, and the balances behind the account reports. There is no one rate that serves the whole file. What is used has to suit the item and the date it arose, come from a published source, and be recorded so the same figure can be reproduced years later. The same underlying amounts drive the exclusion, the credit and the reports, so a rate picked to flatter one of them will contradict another.
Can I claim the exclusion and the foreign tax credit in the same year?
Yes, but not on the same income. The exclusion takes qualifying earnings out of the calculation, and foreign tax paid on earnings that have been excluded cannot then support a credit. So the foreign tax has to be split: the part sitting on the excluded earnings is set aside, and the credit is computed on what is left. That is where a salary above the annual exclusion limit lands, and it is why the two are worked in order rather than side by side.
Does the foreign earned income exclusion reduce self-employment tax?
No, and that is the balance due that surprises people. The exclusion is relief against income tax. The charge on net earnings from self-employment is computed without regard to it, so someone self-employed abroad can show no income tax and still owe. The relief route is a separate one: where a social security agreement covers both countries, coverage can sit in one system rather than two, evidenced by a certificate of coverage. Obtaining that is its own piece of work, not a box on the return.
Can I file jointly with my non-American spouse?
Only by election, and it is a larger decision than the tick box suggests. Treating a spouse who is not a US person as a US resident brings their worldwide income into the US calculation and pulls their accounts and assets into the reporting that travels with the return. It also means obtaining a US taxpayer identification number for them. The election carries forward into later years rather than being renewed annually, and ending it has consequences of its own, so compute the return both ways first and then choose.
I have a green card but live abroad — do I still file?
Yes. Permanent-resident status is a tax status as well as an immigration one, and it does not lapse because you left. It runs until it is formally given up, or until it is ended administratively or judicially, and while it runs the return sits on the same footing as a citizen's, with the same foreign account and asset reporting attached. The years the status ran are the years the IRS looks for, whatever the intention about going back was.
Do I still owe state tax after moving abroad?
Possibly, and it is decided separately from the federal return. A state's claim rests on that state's own law, and several of them test domicile rather than presence, so a domicile survives a move abroad until it is genuinely replaced. Conformity to federal relief varies too, which means earnings the federal return leaves out are not automatically outside a state base. Settle the state question on its own facts rather than assuming the move ended it.
Who qualifies for the Foreign Earned Income Exclusion?
A US citizen or resident with a tax home outside the United States who meets one of two tests: bona fide residence in a foreign country for an uninterrupted period including a full tax year, or physical presence abroad for a qualifying number of days in a twelve-month window. The day count and the exclusion cap both come off Form 2555 for the year in question. Failing both tests does not end relief — the foreign tax credit is the alternative. See Form 2555.
When is Form 1116 not required?
Three situations. You elect the exception for a small amount of creditable foreign tax that arises from passive income and is reported to you on a payer statement such as a 1099 or K-1. You choose to deduct the foreign tax instead of crediting it. Or all the foreign income was excluded under the foreign earned income exclusion, in which case there is no credit to claim on it in the first place. The first option costs you the carryover. See Form 1116.
